U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 0-26918
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CYTOCLONAL PHARMACEUTICS INC.
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2402409
- --------------------------------------------- --------------------------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OR ORGANIZATION)
2110 RESEARCH ROW, SUITE 621, DALLAS, TEXAS 75235
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(214)-353-2922
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(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
CHECK WHETHER THE ISSUER: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
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APPLICABLE ONLY TO CORPORATE ISSUERS
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE: 16,174,173 SHARES OF
COMMON STOCK, $.01 PAR VALUE, OUTSTANDING AS OF AUGUST 1, 2001.
CYTOCLONAL PHARMACEUTICS INC.
TABLE OF CONTENTS
Page(s)
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PART I. FINANCIAL INFORMATION
Item 1. -- Financial Statements:
Balance Sheets as of June 30, 2001 (unaudited)
and December 31, 2000 3
Statements of Operations for the Three Months
And Six Months Ended June 30, 2001 and 2000 (unaudited) 4
Statements of Cash Flows for the Six Months
Ended June 30, 2001 and 2000 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 2. -- Changes in Securities and Use of Proceeds 12
Item 4. -- Submission of Matters to a Vote of Security Holders 12
Item 6. -- Exhibits and Reports on Form 8-K 12
Signatures 13
CYTOCLONAL PHARMACEUTICS, INC.
BALANCE SHEET
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Cytoclonal Pharmaceutics Inc.
Balance Sheet
(unaudited)
June 30,
2001 December 31,
ASSETS (unaudited) 2000
----------- ------------
Current assets:
Cash (principally money market) $ 10,632,000 $ 35,408,000
Investments 20,070,000
Prepaid expenses and other current assets 514,000 495,000
------------ ------------
Total current assets 31,216,000 35,903,000
Equipment, net 801,000 512,000
Leasehold Improvements, net 63,000
Patent rights, less accumulated amortization of
$820,000 and $654,000 614,000 670,000
Notes receivable-officer/stockholder-9.75%
due April 30, 2003 278,000 278,000
Other assets 5,000 15,000
------------ ------------
TOTAL $ 32,977,000 $ 37,378,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 616,000 $ 633,000
Accrued restructuring expenses 465,000
Taxes payable 50,000 95,000
Deferred revenue from research and development
collaborative contract 222,000
Current portion of royalties payable 125,000 125,000
------------ ------------
Total current liabilities 1,478,000 853,000
Royalties payable less current portion 687,000 750,000
------------ ------------
Total liabilities 2,165,000 1,603,000
------------ ------------
Stockholders' equity:
Preferred stock - $.01 par value, 10,000,000 shares authorized;
762,712 and 718,353 shares of Series A convertible preferred
issued and outstanding at June 30, 2001 and December 31, 2000,
respectively (liquidation value $1,906,800 and $1,795,900 at
June 30, 2001 and December 31, 2000, respectively) 8,000 7,000
Common Stock - $.01 par value, 30,000,000 shares authorized:
16,174,173 and 16,146,730 shares issued and outstanding at
June 30, 2001 and December 31, 2000, respectively 162,000 162,000
Additional paid-in capital 67,284,000 67,083,000
Subscription receivable (351,000) (51,000)
Deferred stock-based compensation (300,000) (70,000)
Accumulated deficit (33,821,000) (29,354,000)
Treasury stock, 411,200 shares of common stock and
260,600 shares at cost June 30, 2001 and December 31, 2000,
respectively (2,170,000) (2,002,000)
------------ ------------
Total stockholders' equity 30,812,000 35,775,000
------------ ------------
TOTAL $ 32,977,000 $ 37,378,000
============ ============
See notes to financial statements.
3
CYTOCLONAL PHARMACEUTICS, INC.
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
(note 4) (note 4)
Revenue:
Licensing & research collaborative
agreement $ 334,000 $ 343,000 $ 667,000 $ 687,000
------------ ------------ ------------ ------------
Operating Expenses:
Research and development 1,858,000 608,000 3,006,000 1,185,000
General and administrative 1,791,000 1,464,000 2,776,000 3,729,000
------------ ------------ ------------ ------------
3,649,000 2,072,000 5,782,000 4,914,000
------------ ------------ ------------ ------------
Operating (loss) (3,315,000) (1,729,000) (5,115,000) (4,227,000)
------------ ------------ ------------ ------------
Other (Income) expense:
Interest (income) (367,000) (435,000) (828,000) (516,000)
Interest expense 1,000 1,000 1,000 3,000
------------ ------------ ------------ ------------
(366,000) (434,000) (827,000) (513,000)
------------ ------------ ------------ ------------
NET (LOSS) (2,949,000) (1,295,000) (4,288,000) (3,714,000)
Preferred stock dividend (0) (43,000) (180,000) (87,000)
------------ ------------ ------------ ------------
Net (loss) attributable to
common shareholders $ (2,949,000) $ (1,338,000) $ (4,468,000) $ (3,801,000)
============ ============ ============ ============
Net (loss) per share-basic and diluted (0.18) (0.09) (0.28) (0.29)
============ ============ ============ ============
Weighted average number of
shares outstanding - basic and
diluted 16,154,427 15,197,000 16,160,388 13,177,000
============ ============ ============ ============
See notes to financial statements
4
CYTOCLONAL PHARMACEUTICS INC.
STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
----------------------------
2001 2000
------------ ------------
Cash flows from operating activities:
Net (loss) $ (4,288,000) $ (3,714,000)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization 136,000 85,000
Value stock-based compensation 234,000 1,813,000
Changes in:
Other assets 47,000 (16,000)
Deferred revenue 222,000 (140,000)
Accounts payable and accrued expenses 340,000 43,000
------------ ------------
Net cash used in operating activities (3,309,000) (1,929,000)
------------ ------------
Cash flows from investing activities:
Notes receivable - officer/shareholder -- (63,000)
Purchase of securities (20,070,000) --
Purchase of equipment (461,000) (27,000)
------------ ------------
Net cash used in investing activities (20,531,000) (90,000)
------------ ------------
Cash flows from financing activities:
Proceeds from exercise of options and warrants -- 38,423,000
Payment of royalties -- (73,000)
Purchase of treasury stock (936,000) (743,000)
------------ ------------
Net cash (used in) provided by financing activities (936,000) 37,607,000
------------ ------------
NET INCREASE (DECREASE) IN CASH (24,776,000) 35,588,000
Cash at beginning of period 35,408,000 3,213,000
------------ ------------
CASH AT END OF PERIOD $ 10,632,000 $ 38,801,000
============ ============
Supplemental disclosures of cash flow information:
Noncash investing activities:
Equipment acquired included in accounts
payable and accrued expenses: -- $ 15,000
See notes to financial statements
5
CYTOCLONAL PHARMACEUTICS INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2001
(unaudited)
(1) FINANCIAL STATEMENT PRESENTATION
The unaudited financial statements of Cytoclonal Pharmaceutics Inc., a
Delaware corporation (the "Company"), included herein have been
prepared in accordance with the rules and regulations promulgated by
the Securities and Exchange Commission and, in the opinion of
management, reflect all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the results of
operations for the interim periods presented. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. However,
management believes that the disclosures are adequate to make the
information presented not misleading. These financial statements and
the notes thereto should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000. The
results for the interim periods are not necessarily indicative of the
results for the full fiscal year.
(2) RESEARCH AND COLLABORATIVE AGREEMENT
In June 1998, the Company entered into a license and research agreement
with Bristol-Myers Squibb ("BMS") on two technologies related to
production of paclitaxel, the active ingredient in BMS's largest
selling cancer product, Taxol(R). The agreement includes fees,
milestone payments, research and development support and minimum and
sales based royalties.
(3) LOSS PER COMMON SHARE
Basic and diluted loss per common share is based on the net loss
increased by dividends on preferred stock divided by the weighted
average number of common shares outstanding during the period. No
effect has been given to outstanding options, warrants or convertible
preferred stock in the diluted computation, as their effect would be
antidilutive.
(4) STOCK BASED COMPENSATION
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." In October 1995, the Financial Accounting
Standards Board issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which establishes a fair value-based
method of accounting for stock-based compensation plans. The Company
has adopted the disclosure-only alternative under SFAS No. 123. The
Company accounts for stock based compensation to nonemployees using the
fair value method in accordance with SFAS No. 123 and Emerging Issues
Task Force (EITF) Issue No. 96-18. The Company has recognized deferred
stock compensation related to certain stock option and warrant grants.
During the six months ended June 30, 2001 the Company granted 5,000
options to purchase shares of its Common Stock at $7.188 per share, in
return for consulting services. The Company valued these warrants based
on the Black-Scholes option-pricing model. In connection therewith, the
Company recorded a non-cash charge of $2,784 during the six months
ended June 30, 2001. In connection with other option grants to
consultants in
6
previous years, the Company recorded a non-cash charge of $231,388
during the six months ended June 30, 2001.
(5) DEFERRED REVENUE
The Company recognizes revenue from development agreements over the
stated life of the agreement. Amounts received in advance of the
services to be performed are recorded as deferred revenue. Accordingly,
funds of $1,000,000 received February 2001, net of $777,000 in revenues
recognized in the quarters ending December 31, 2000, March 31, 2001 and
June 30,2001, are recorded as deferred revenue of $222,000 as of June
30, 2001.
(6) ACCRUED RESTRUCTURING EXPENSES
The Company generally recognizes operating expenses as incurred. As a
part of its efforts to redirect Company resources for its projects, the
company restructured its organizational structure and eliminated four
positions in various divisions. The entire anticipated costs,
($460,000) was charged to operations in the quarter ending June
30,2001. The Company will continue to refine its plans regarding other
potential changes and anticipates completion by December 31, 2001. Any
further effect on revenue or net operating losses from the restructure
is expected to be minimal.
(7) SALE OF TREASURY STOCK
In May 2001, the Company sold 100,000 shares of treasury stock to
President/CEO Ronald L. Goode for a purchase price of $3.25 per share
of common stock, the fair market value at the time of the purchase, and
provided financing of $300,000 from the Company. The transaction was
classified as a loan and the unpaid balance of $300,000 is reflected as
subscriptions receivable in stockholder's equity. The Company values
its investment in its common stock at a weighted average cost of
approximately $7.67 per share, and accordingly, reflected a reduction
of Additional Paid in Capital of $442,000, or the difference between
and the weighted average price of $767,000 and the purchase price of
$325,000.
(8) OTHER ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Boards issued
Statement No. 141 Business Combinations, and Statement No. 142 Goodwill
and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the new rules.
Other intangible assets will continue to be amortized over their useful
lives. The Company will apply the new rules on accounting for goodwill
and other intangible assets beginning in the first quarter of 2002. The
Company will perform the first of the required impairment tests of
goodwill and other intangible assets during 2002. The Company has not
yet determined what the effect of the new statements and required
impairment tests will be on the earnings and financial position of the
Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Financial Statements and the Notes thereto
included in this report. This discussion contains certain forward-looking
statements that involve substantial risks and uncertainties. When used in this
report, the words "anticipate," "believe," "estimate," "expect" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements. The Company's actual results,
performance or achievements could differ materially from those expressed in, or
implied by, these forward-looking statements. Historical operating results are
not necessarily indicative of the trends in operating results for any further
period.
We were organized and commenced operations in September 1991. Our efforts
have been principally devoted to research and development activities and
organizational efforts, including the development of products for the treatment
of cancer and infectious diseases. For the past three years we have acquired
advanced drug creation software and technology, recruited competent experienced
scientific and management personnel and advisors and raised capital. Our strong
financial position has provided the necessary resources to become a fully
operational and profitable drug creation company. We are currently engaged in a
strategic planning process designed to identify and implement the changes
necessary to complete that task.
We have strengthened our Board of Directors, elected a new Chairman, and
enhanced our executive staff with the addition of a new President/CEO, and two
vice-presidents, one as controller and one in business development. Our former
President and CEO, also a founder of the Company, has taken on the role of
Executive Vice President and remains a director.
Since the beginning of the second quarter, our management team has, with the
assistance of other staff members as well as expert scientific and business
consultants, reviewed and analyzed all the existing operations of the Company,
its projections, assumptions and future plans. This rigorous analysis is driven
by a renewed focus to achieve future profitability and to ensure that existing
resources will be adequate to achieve that purpose. An integral part of this
process has been a review of the current marketplace for our proposed products
and services, an updated evaluation of our competitors and their products, and a
realistic evaluation of the viability of the products we have in development. As
we progress towards the completion of this comprehensive strategic planning
process, we have implemented improvements to the organization of our personnel.
As a result of this process the Company has established a reserve for
restructure that recognizes $460,000 in operating expenses for current positions
that have been eliminated in order to allow for the hiring of highly skilled
scientists.
We expect to make additional revisions to our operations to eliminate
non-productive activities and to appropriately balance short and long-term
profitability. We have reviewed our past performance in establishing reasonable
timetables and are refocusing our efforts to accurately estimate a realistic
timeframe.
8
We continue to focus on the expansion of our two drug design platform
technologies: Quantum Core Technologies(TM) (QCT(TM)) and OASIS(TM) as well as
the other activities described below. We have strengthened and expanded our
affiliations with universities and other research institutions to ensure that we
obtain the most advanced scientific knowledge available. In addition, we have
increased our emphasis of identifying opportunities for collaborations,
strategic alliances and joint ventures with pharmaceutical and biotechnology
companies for the commercial development of our products.
We believe that we have a capable, focused Board and management team,
promising technology and strong financial resources. We intend to take the steps
as identified in our strategic planning process, eliminating the less productive
activities and concentrating our efforts and resources on the projects with the
most promise. During the next twelve months we plan on concentrating our efforts
in the following areas:
o Designing drugs (using QCT(TM)) that inhibit specific, targeted
proteins;
o Designing gene-regulating antisense reagents (using our OASIS(TM)
genome library);
o Continuing our collaboration with Bristol-Myers Squibb Company, Inc.
pursuant to our license and research and development agreements to
utilize microbial fermentation and genetic engineering to develop
Paclitaxel in commercial quantities at lower costs; and
o Seeking to establish additional partnerships and strategic alliances
for the development, manufacturing, marketing and sales of vaccines and
pharmaceuticals for treatment and prevention of cancer and infectious
diseases.
Our actual research and development and related activities may vary
significantly from current plans depending on numerous factors, including
changes in the costs of such activities from current estimates, the results of
our research and development programs, the results of clinical studies, the
timing of regulatory submissions, technological advances, determinations as to
commercial potential and the status of competitive products. The focus and
direction of our operations will also be dependent upon the establishment of
collaborative arrangements with other companies, the availability of financing
and other factors.
RESULTS OF OPERATIONS
Revenue
We recognized revenues of $667,000 and $687,000 for the six months
ended June 30, 2001, and June 30, 2000, respectively. Revenues were $334,000 and
$343,000 for the three months ended June 30, 2001 and June 30, 2000
respectively. Revenues in both periods were attributable to license and research
and development payments from our agreements with Bristol-Myers Squibb.
Research and Development Expenses
9
We incurred research and development expenses of $3,006,000 and
$1,185,000 for the six months ended June 30, 2001 and 2000, respectively. For
the quarter, ended June 30, 2001 and 2000, research and development expenses
were $1,858,000 and $608,000, respectively. The increase in research and
development expenses in 2001 from 2000 was related to increases in research and
development salaries due to additional scientific staff, increases in expenses
for contract research and research consultants as well as increases in
laboratory expenses as we expanded our research and development activities.
Expenses related to restructuring our scientific staff also contributed to the
increase of research and development costs. In addition, $300,000 in costs for
research consultants, which in prior years were charged to general and
administrative expenses, has now been classified as research cost.
We anticipate that we will incur increased research and development
expenses as we move products from pre-clinical to clinical trials and as we
expand our drug discovery efforts. We also expect to hire additional technical
staff to aid in the fulfillment of these goals.
General and Administrative Expenses
We incurred general and administrative expenses of $2,776,000 and
$3,729,000 for the six months ended June 30, 2001, and 2000, respectively. The
primary decrease in these expenses was attributable to a decrease in public and
financial relations expenses, which included $1,613,000 in non-cash charges in
2000 related to issuance of warrants to financial advisors offset by increases
in salaries and other operating expenses in 2001 related to the addition of
personnel and corporate activities. For the quarter ended June 30, 2001 and
2000, general and administrative expenses were $1,791,000 and $1,464,000,
respectively. The primary increase in general and administrative expenses in
2001 from 2000 is a result of the restructuring efforts of the Company which
included hiring additional senior staff members, consultant fees for business
and scientific experts and other related activities.
We anticipate that we will incur increased general and administrative
expenses as we expand our administrative staff to aid in our business
development efforts.
Interest Income
Interest income was $828,000 and $516,000 for the six months ended June
2001 and 2000, respectively. Interest income was $367,000 and $435,000 for the
three months ended June 30, 2001 and 2000, respectively. The increase in
interest income is due to the increase in available cash balances resulting from
the conversion of approximately 5,000,000 in C and D warrants which resulted in
the receipt of approximately $40,000,000 during the first six months of 2000.
Net Loss
We incurred net losses of $4,288,000 and $3,714,000 for the six months
ended June 30, 2001 and 2000, respectively. Net losses were $2,949,000 and
$1,295,000 for the three months ended June 30, 2001 and 2000, respectively. The
increase in net loss in 2001 to 2000 was attributable to an increase in costs
for hiring both scientific and management personnel, costs related to
restructuring the operations of the Company as well as increased
10
operating costs for research and development as we expand our drug creation
efforts.
Liquidity and Capital Resources
At June 30, 2001, we had cash and cash equivalents of approximately
$10,632,000 and investments in marketable securities of $20,070,000. Since
inception we have financed our operations from debt and equity financings as
well as fees received from licensing and research and development agreements.
During the six months ended June 2001, we used cash of approximately $3,309,000
to fund our operating activities, principally caused by the net loss of
$4,468,000. In addition, during the three months ended June 30, 2001 we used
approximately $20,070,000 to fund investing activities, which primarily
consisted of the purchase of securities and financing expenses of $936,000 for
the purchase of treasury stock.
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
which establishes a fair value-based method of accounting for stock-based
compensation plans. The Company has adopted the disclosure-only alternative
under SFAS No. 123. The Company accounts for stock based compensation to
nonemployees using the fair value method in accordance with SFAS No. 123 and
Emerging Issues Task Force (EITF) Issue No. 96-18. The Company has recognized
deferred stock compensation related to certain stock option and warrant grants.
During the six months ended June 30, 2001 the Company granted 5,000 options to
purchase shares of its Common Stock at $7.188 per share, in return for
consulting services. The Company valued these warrants based on the
Black-Scholes option pricing model. In connection therewith the Company recorded
a non-cash charge of $2,784 during the six months ended June 30, 2001. In
connection with other option grants to consultants in previous years the Company
recorded a non-cash charge of $231,388 during the six months ended June 30,
2001.
We have agreed to fund scientific research at academic institutions
and/or to make minimum royalty payments for licensing and collaborative
agreements of approximately $800,000 for the two quarters remaining in 2001. We
do not expect these arrangements to have a significant impact on our liquidity
and capital resources. We intend to continue to maintain and develop
relationships with academic institutions and to establish licensing and
collaborative agreements.
We have no material capital commitments for the year ending December
31, 2001.
We believe that we have sufficient cash and cash equivalents at June
30, 2001 to finance our plan of operation through December 31, 2002. However,
there can be no assurance that we will generate sufficient revenues, if any, to
fund our operations after such period or that any required financings will be
available, through bank borrowings, debt or equity offerings, or otherwise, on
acceptable terms or at all.
11
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
For the quarter ended June 30, 2001, the Company sold 100,000
shares of Company stock held as Treasury stock to President/CEO Ronald L. Goode
at a purchase price of $3.25. The shares of Common Stock were granted and sold
pursuant to the exemption afforded by Section 4(2) promulgated under the
Securities Act since such issuances did not involve a public offering.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders ("Annual
Meeting") on June 4, 2001 which was adjourned until June 15, 2001. The purpose
of the Annual Meeting was (i) to elect seven directors each for a term of one
year or until their respective successors are elected and qualified; (ii) to
ratify the selection of Ernst & Young LLP as independent auditors of the Company
for its fiscal year ending December 31, 2001; and (iii) to approve amendments to
the Company's 2000 Stock Option Plan to (a) increase the number of incentive
stock options and nonqualified stock options available for grant from 1,500,000
to 2,750,000 options, and the number of shares of common stock reserved for
issuance thereunder from 1,500,000 to 2,750,000; (b) change the vesting period
for options, such that one-third of the options vest on the first anniversary of
the date of grant, one-third vest on the second anniversary of the date of grant
and the final third vest on the third anniversary of the date of grant; and (c)
permit new option holders and existing option holders to exercise their options
by cashless exercise of their options or other means.
At the Annual Meeting, Arthur P. Bollon, Robert J. Easton,
Gary E. Frashier, Ira J. Gelb, Irwin C. Gerson, Ronald L. Goode and Walter M.
Lovenberg were elected as directors of the Company. The number of votes for each
of the nominees was 14,825,901 for and 292,202 withheld. The stockholders voted
14,845,254 shares to ratify the selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending December 31, 2001, 240,790
shares voted against and 32,059 shares abstained. The amendments to the
Company's 2000 Stock Option Plan were approved by the Company's stockholders by
a vote of 2,608,907 shares for, 2,094,784 shares against, and 63,131 shares
abstained.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company filed a Report 8-K on April 27, 2001 to announce that Richard
A. Eisner was dismissed as the Company's independent auditor. The firm of Ernst
& Young was elected as the Company's independent auditors.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYTOCLONAL PHARMACEUTICS INC.
Date: August 14, 2001 /s/ Joan H. Gillett
------------------------------
Joan H. Gillett, C.P.A.
Vice President/Controller
Principal Accounting Officer
13